COVID-19 and property assessment appeals
COVID-19 and Property Tax
Property Tax Appeals Process
May 13, 2020
In response to a recent tornado and the COVID-19 pandemic, the mayors of Nashville and the Metro council are considering relief measures to offset the financial shortfall expected to hit the city in upcoming months. On March 2nd, an EF3 tornado devastated Nashville, affecting not only the health and safety of many residents, but also leaving a swath of wreckage, destroying numerous buildings and area structures.
Before Nashville had time to recover, the COVID-19 pandemic resulted in a government shutdown of the city and surrounding areas. As a result, Nashville anticipates a $470 million revenue loss for the upcoming 16 months. For a city with an economy that is based primarily on entertainment and tourism that depends on large groups of people gathering together, the effect of social distancing due to the COVID-19 shutdown could be catastrophic.
The total budget last year anticipated a shortfall of $41.5 million. The Metro Finance Department predicted a fourth-quarter deficit in 2020 of $200 to $300 million even before the pandemic started. Now, the shortfall is anticipated to be even greater, and borrowing federal money will not be an option based on Nashville’s existing debt. After the tornado and pandemic, the new shortfall is expected to be up to $470 million. Mayor Cooper’s new plan will be based on a $2.4 billion budget, which is $115 million more than last year’s budget. With no rainy-day fund available, the Nashville city government will seek other sources of operating income. Mayor Cooper announced his new budget plans for 2020-21 on May 1st, unleashing a 32% increase in property taxes, together with a proposal for closing gaps in the existing budget. It is expected to bring in more than $332 million in revenue for the city. According to this plan, a substantial portion of the burden for the city’s new budget will fall on the shoulders of the residents and taxpayers of Davidson County.
In his previous role as Councilman-at-Large for Davidson County, Mayor Cooper had developed numerous strategies for bringing revenue to the city of Nashville. To keep Nashville independent and to prevent state supervision, Mayor Cooper had planned to secure additional revenue from tourism and downtown development, to invest in the development of new large-scale entertainment venues, and to redesign the Nashville transportation system to make it more universally accessible.
Prior to the pandemic, Mayor Cooper had finalized a soccer stadium deal that would allow major-league soccer games to be held in the city to bring additional entertainment revenue to Nashville. The city acquired the new soccer stadium as a revenue investment and is eventually expected to attract up to $650 million in further investment to the fairgrounds in Nashville. The soccer stadium not only represents a new source of developmental income for the city, but also allows taxpayers to save $19 million over the next decade in infrastructure costs and $35 million in rental costs.
Scrapping Nashville’s previous costly and overly ambitious designs for a new transit system, Mayor Cooper introduced a new transportation plan that takes a fiscally conservative approach by redesigning problem intersections and re-engineering bus routes to avoid traffic congestion and scheduling issues. Last year, Cooper put funds towards the transportation plan to alleviate traffic and increase general accessibility. He directed $17.5 million to pedestrian bridge projects and $1.5 million toward traffic mitigating projects.
With unprecedented challenges to Davidson County’s economy, the mayor’s existing plans to boost Nashville’s economy will not be enough to offset drastic shortfalls in State and local funding.
Mayor Cooper’s response will be immediate and aggressive.
Mayor Cooper announced that property taxes will drive recovery for the city. COVID-19 has resulted in plummeting activity taxes (sales taxes), placing Nashville in its worst economic shape in its history. Prior to the pandemic, Nashville entered the fiscal year with a $41.5 million deficit, but Mayor Cooper was able to balance the budget with relative ease. The emerging pandemic-driven budget crisis poses budget-balancing challenges on an altogether new level that projects an anticipated deficit of $470 million.
Proposed solutions to bridge this shortfall include increasing sales taxes, levying fines for parking, and sweeping property tax increases across the entire spectrum from residential to industrial property.
Mayor Cooper hopes to boost revenues through increased property taxation in Davidson county. In the 2019-20 Metro government budget, property taxes generated 45.7% of municipal revenues and sales taxes generated 20.6%. Nashville will need to compensate for the sudden shortfall in sales tax revenues, with a corresponding increase in property taxes.
In addition to increased property taxes, Mayor Cooper has requested that the public schools adopt spending limits substantially below their previous budget allocations. He hopes to cut $100 million in spending on the Metro Nashville Public Schools based in part on reduced operating costs for the remainder of the school year while schools are shut down. Metro Nashville Public Schools account for 41% of the city’s budget costs.
Suspending development activity for cash-demanding revenue-generating projects in favor of a regimen of tax increases and spending cuts will conserve further. Cash investments in large-scale venues and the transportation systems have been put on hold. Not surprisingly, Mayor Cooper’s plan has been met with strong opposition. Once the city is freed of its shutdown, the government will have to work to bring the economy back to normal and try to find ways to balance the budget once again before investing more on their developmental project.
President Trump and FEMA declared the tornado that hit Tennessee on March 3rd to be a major disaster. A declared disaster declaration accompanied that event for individual assistance for residents and businesses in Benton, Carroll, Davidson, Putnam, Smith and Wilson counties, that will have postponed IRS deadlines and payment relief.
Working capital applications will be due December 7, 2020. Affected taxpayers will also have until July 15, 2020, to make their 2019 IRA contributions. Contact the Customer Service Center at 800-659-2955 or email firstname.lastname@example.org for more information on SBA disaster assistance.
With tax rates poised to skyrocket, every dollar of value assessed against a property will have a magnified impact on property taxes. Making sure that the county’s valuation of a property is accurate remains critical now more than ever. The current property tax rate was previously $3,155 per $100 of assessed value in the Urban Services District, the lowest rate in the history of metro government. However, with property taxes as the centerpiece of Mayor Cooper’s recovery plan, taxes are likely to increase by 32%. Tax appeals, though filed by some, have been largely overlooked in Davidson County until recently. With increases of this magnitude, there is likely to be a surge of appeals activity in May 2021. The time to begin developing a case is now. Contact our offices for a consultation at no cost.
Reassessed properties will be assessed and valued based on their present condition, subsequent to the tornado. The assessor has designated a category for “substantial damage” that can be applied to buildings and improvements that are rendered unfit for use or occupancy. This category will reduce the property valuation by 50%.
Assessments for commercial and industrial tangible personal property that was destroyed or substantially damaged by the tornado and which is not restored or replaced by September 1, 2020, will be prorated by the assessor based on the date the damage occurred.
Those who received FEMA disaster assistance for their primary residences are entitled to a refund of state and local sales taxes paid towards major appliances, furniture, or building supplies up to $2,500.00.
The IRS will identify taxpayers in the area located for disaster and will file automatically for payment relief. If outside the indicated disaster area, call the IRS disaster hotline at 866-562-5227 to request this tax relief.
Penalty waivers and payment plans can be requested from taxpayers that provide monthly payments over time instead of one-time payments. This can be requested through the Department of Revenue on a case-by-case basis. Assistance is available at 615-253-0600 or email at email@example.com
Filing and paying franchise taxes, excise taxes, and Hall income taxes are now extended until July 15th, 2020. This extension applies to quarterly estimated payments as well. There will be no interest and penalties applied.
With unprecedented tax increases looming, managing the impact of Davidson County property assessments remains critical to keeping the tax bills for a property in line. Let our lawyers, tax professionals, and strategic teams partner with you in the aggressive pursuit of fair and equitable assessment. Call Loren Doty at (615) 649-9240 or e-mail us at Loren@prptax.com.
Vanessa concentrates on state level appeals with the PTAB team with a focus on document and appeals administration, evidence gathering, and compilation. She also supports the Refund Group assisting with file administration and disbursement.
Siegel & Callahan, P.C. is singularly focused on property tax appeals serving clients throughout the United States.
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